What is her apc, Basic Statistics

The life-cycle hypothesis is based on the assumption that people try to smooth their consumption over their expected adult lifetimes.  Suppose Tammy expects to live for another T years and expects to work for R years and earn an annual real income of Y dollars per year.

Tammy will then retire for (T - R) years, and she wants to smooth her annual consumption C and also plans to spend her entire lifetime earnings (R x Y) over the remaining T years.  This could be expressed as:

C x T = R x Y.

Note that in class I would have expressed this as:

C x NL = WL x YL

Where NL represents the number of years of life remaining, WL the number of years of working life remaining, and YL the annual real income per year over the WL years of work.

a.  Suppose Tammy begins working at age 20, intends to retire at age 65, and expects to live until age 80.  If Y = $40,000, what is Tammy's annual C?  What is her APC?  Her APS?

b.  Now suppose Tammy begins her adult life with an initial wealth level equal to W.  Consequently, the total amount she will now have available to spend during her lifetime will be

(R x Y + W).  If Tammy still wishes to smooth her consumption, then:

C x T = (R x Y) + W

Suppose that W = $120,000 and Y = $40,000.  What is Tammy's annual C under these assumptions? 

c.  Assume now that Y rises to $80,000 and W remains equal to $120,000.  What is the MPC out of income (Y)?  What is the APC out of wealth (APCW)?

Posted Date: 2/21/2013 8:07:34 AM | Location : United States







Related Discussions:- What is her apc, Assignment Help, Ask Question on What is her apc, Get Answer, Expert's Help, What is her apc Discussions

Write discussion on What is her apc
Your posts are moderated
Related Questions
IN two separate studies, the actual difference between the means of a treated group and untreated group is 3 points. However, in one study sm1-m2 is very large and so the 3 points

what is the basic difference between seasonal variation and cyclical variation

Read Confidence Intervals and P-values in Section C of your Lecture Workbook or on Cecil under Assignment Resources. Consider a study to determine ways the response rate in surveys

how can we construct a bivariate frequency distribution

Find the value of E (i+). Show your calculation. i=7 i=3

Isotopes Elements having same atomic number Z, but different A mass number for example 126C, 146C and 11H 21H, 31H are isotopes of carbon and hydrogen. Isotones Elements havi

find a distribution with 10 values between 0 and 10 that has as large a variance as possible

This assignment is designed to compare performance between Matlab and Excel for performing nonlinear regression analysis of a set of data. There are two data sets in the accompanyi

Ask questio How many women must be randomly selected to estimate the mean weight of women in one age group? We want 90% confidence that the sample mean is within 3.7 lbs of the po

The following are actual data showing the latitude of a sample of major cities in the northern hemisphere and their mean high annual temperature. latitude(X)    mean high temp(Y